Assignment For (Week 8)

1) Given the following information, compute the economic order quantity, annual
holding cost, annual order cost and annual total inventory cost.

Annual requirements (R) = 50,000 units Order cost (S) = PKR 150 per order Holding rate (k)
= 15% and Unit cost (C) = PKR 100 per unit

 EOQ = √2RS/kC= √2x50, 000x $150/.15x $100= √15,000,000/15= √1,000,000

EOQ= 1,000 units

 Annual holding cost = (Q/2) x k x C = (1,000/2) x .15 x $100 

Annual Holding Cost= $7,500

 Annual order cost = (R/Q) x S = (50,000/1,000) x $150

Annual Order Cost = $7,500

3. The annual requirement of a part is 360,000 units. The order cost is PKR120 per
order, the holding rate is 12 percent and the part cost is PKR 2,500 per unit. What
are the (a) EOQ, (b) annual holding cost, (c) annual order cost, and (d) annual total
inventory cost?
a) EOQ = 536.66 units
b) Annual Holding Cost = $80,498.45
c) Annual Ordering Cost = $80,498.45
d) Annual Total Cost = $160,996.90